Developing natural products and new value chains in
Kelantan while maintaining cultural integrity: What, How and
For Whom.
Mohd. Murray Hunter
Centre for Communication and Entrepreneurship
University Malaysia Perlis (UniMAP)
Abstract
Kelantan, situated in the Far North-East of the Malay Peninsula has been built upon the proud traditions of a
rural based social-economy. The Malaysian state of Kelantan has been relatively independent, without direct
foreign occupation and control since the early 1400s, except for short periods by the Siamese and Japanese.
Malay tradition and culture is relatively undiluted in Kelantan in contrast with the other states in Malaysia.
Maintaining cultural integrity and traditions is something important to both the social and spiritual identities
and aspirations of the Kelantanese, and this factor must be considered in any potential development in the
state.
Therefore the development of natural products in Kelantan must be approached differently from the rest of
Malaysia due to the above cultural factors and aspirations of local people. Ignoring international opportunities
for natural based products would disadvantage Kelantan, but at the same time ushering in large multinational
companies to exploit Kelantan’s natural resources such as land would have high social costs from the
Kelantanese perspective.
This implies that the development of natural products should be on a small enterprise scale rather than large
enterprise scale, the new industries do not drastically change cultural conditions, and this be achieved with
limited resources and more upon local exploration and cooperation, rather than outside interference.
Consequently business models based on cooperative labour and shura decision systems, in decentralized
production units would be a preferred option. Marketing paradigms need to be developed that carry
Kelantanese culture as a theme specializing in particular niche markets need to accompany these new
production models.
The potential for natural product development in Kelantan along the business models outlined above include
herbs, essential oils, nutraceuticals, cosmoceuticals, natural dyes, Islamic medicines, food ingredients,
traditional products, and some biotechnology based products including organic agricultural chemicals, all with
Toyyib/Halal integrity can be developed and commercialized with specialized value chains based on low
resource endowments. These products have specific markets nationally, regionally, and internationally
through new supply chains developing across the world including organic, Fair-trade, and Halal markets.
This paper will discuss the above issues, canvass what products can be developed, how they can be developed
and new value chains created, with a low resource endowment on the part of local entrepreneurs.
Keynote Address to the Conference on Plant Natural Products: Integrating Traditional Practices &
Technology Advancement for Creating Business Opportunities, 21-22 November 2011, Grand River
View Hotel, Kota Bahru, Kelantan.
Introduction
“On one hand, rural development starts with people and their education, organization,
and discipline. Without these three, all resources remain latent, untapped potential.”
E.F. Schumacher 1975, P. 168.
Kelantan is situated in the far North-East of the Malay Peninsula, bordering the Southern
Thai province of Narathiwat in the North, Perak in the West, Taman Negara in the South,
and Terengganu along the East Cost. The majority of Kelantan’s 1.45 million inhabitants
reside on a fertile coastal flood plain where paddy, rubber, and fruit crops are produced.
There is a long established fishing industry situated where the Kelantan River meets the
South China Sea. Kelantan is accessible by road along the coast, from the Western part of
the Peninsula through Grik and Jeli, and now to Kuala Lumpur through Gua Musang via
Pahang. The Titiwangsa Mountains running North-South along the Western border of
Kelantan has historically isolated the state from the rest of the Peninsula, where Southern
Thailand influence has been much stronger in many regards. The Malay language is unique
in Kelantan with Jawi still being used throughout the state in preference to Rumi. Malay
traditions and pastimes like kite flying, bird competitions, top spinning, kertok (drumming),
and even wayang kulit are still embedded within Kelantanese life.
The state of Kelantan has been relatively independent, without direct foreign occupation
and control, except for short periods by the Siamese and Japanese. As a consequence,
Malay culture and tradition in Kelantan is relatively undiluted in contrast to the other states
of Malaysia. Kelantan is not necessarily in the race to become an industrialized region.
Development has tended to be more selective and focused upon creating the ability to earn
a livelihood within the framework of particular SME type activities in preference to
manufacturing industry is a priority for those domiciled in Kelantan. Development in
Kelantan, particularly the rural areas may be closer to the Schumachian model with a
Kelantanese and Islamic flavour, rather than the Rostow model1. The structure of kelantan’s
economy is different from the rest of Malaysia in that;
• There is greater reliance of self-employment (mainly food and service industry),
• A higher incidence of small holder rather than plantation type agriculture,
• Lower reliance on manufacturing for a salaried livelihood, and
1 The Schumachian model of development could be considered to be based on the belief of a self-reliant
economy that supports human development within their cultural paradigm, supported by appropriate rather
than imported technology. In contrast, Rostow advocated the transformation of traditional society to
becoming an industrialized society.
• A stronger cultural identity.
As a consequence Kelantan does not necessarily bare the full brunt of economic downturns
and recessions in the same way that other parts of Malaysia does.
It is apparent that Kelantanese prefer a village based life, where 65% of the population is
rurally domiciled, compared to those living in other states. The gap between urban and rural
dwellers is economically wide, but Kelantanese see the benefits of living in rural areas,
notwithstanding that there are some disadvantages in education and exposure to
opportunity. In rural areas, school dropout rates are higher, the propensity to attend higher
institutes of education lower, resources scarcer, potential markets smaller, networks
weaker, and exposure to the outside world where new ideas come from much less. The
potential of business growth is much more limited. In addition, families tend to be more
preoccupied with making a living today rather than seeing the wisdom of sending their
children for higher education. Businesses tend to be more simplistic and service orientated,
focusing in providing a ‘day to day’ survival rather than SMEs with high growth objectives.
In addition to the above orientations and issues, technology has been very difficult to obtain
because of cost, remoteness, lack of knowledge of opportunities, and lack of educational
infrastructure. However with the advent of University Malaysia Kelantan (UMK) this
scenario may slowly change as the university develops effective local outreach where locally
orientated research results and technology is disseminated to the community. This may
assist in the local communities accessing basic skills and technologies which widen the scope
of entrepreneurial opportunity2.
Many Government agencies and programs aimed at eradicating poverty in the region have
lacked market orientation. Any individual success would appear to be more the result from
a few committed and passionate ‘local champions’ who have been able to develop the
imagination and commitment of the people they are working with. Many different models
have been utilized and new initiatives launched which often seem to lack thought and
sensitivity to the target groups they are aimed at empowering3.
The Current Economic Environment
2 Since the cost of importing machinery is often very high, R&D institutions need to focus on developing the
ability to fabricate equipment locally that are suited to local conditions and cost a fraction of the price of
importation. 3 For example, the Northern Corridor Economic Region Initiative was launch last July in Northern Malaysia. It
aims to engage private ‘Government linked Companies” (GLCs) to organize production of small holders in the
Northern states of Malaysia. No studies have ever been undertaken to determine whether local farmers are
willing to except outside organizations controlling their lands in what are called ‘mini estates’. See Northern
Corridor Economic Region Socioeconomic Blueprint 2007-2025, Sime Darby, Kuala Lumpur, 30th
July 2007, P.
28.
The economy of Kelantan is primarily rural based with paddy, rubber, and palm oil taking up
the greatest acreage. Fruit and market gardening are also undertaken around populated
areas where there are local markets. There is a logging industry based on rubber-wood,
although in some areas logging is undertaken directly from the jungle. Light scale SME based
agro-industry exists primarily based around the coastal areas near Kota Bharu, along with a
light scale industrial base primarily catering for local engineering needs. An established
fishing industry operates along the coast with spasmodic agro and eco-tourism throughout
the state. Cottage handicraft industry producing kain batik, silver, and wooden products
also exist on the fringes of the urban areas, these activities not penetrating into the deep
rural areas as these enterprises still need a significant amount of capital. The local
construction industry supplies local stock needs for residential and light commercial
premises. A product space map showing the density and relative size of these industries is
shown in Figure 1.
Natural product based activity development is still limited in Kelantan. There are a couple of
green biotechnology pilot projects underway, initiated by the Kelantan Biotechnology
Corporation, and a small number of domestic herb companies have initiated contract
growing and the local processing of herbs within the state. Crops produced under contract
arrangements include Tongkat Ali (Eurycoma longfolia), Misai Kuching (Orthosiphon
stamineus), Mas Cotek (Ficus deltoidea), Pegaga (Centella asiatica), and Dukung anak
(Phyllanthus amarus). SME based herb companies are restricted due to the lack of GMP
facilities available for contract processing within the state. Some minor production of
essential oils and natural cosmetics is also undertaken within the state.
Given the above, it is necessary to seek new areas that can provide better returns than the
present activities, where the focus must rely less on traditional crops and more on new
crops that can provide adequate returns. These new crops must be able to be produced
without relying on high capital concepts of production and economies of scale, thus not
disrupting present culture and lifestyle. This requires building new supply and value chains
and changing the present paradigm from competition amongst local SMEs to that of
creating cooperative and complementary businesses that can enter new markets. This will
require a lot of guidance on how to discover, evaluate, develop, and grow a new SME within
remote locations that connect with national and international markets4.
4 This is not beyond expectations as this has been successfully done in Thailand through the One Tambon One
Product Program (OTOP) in the provinces of Narathiwat, Yala, Pettani, Satun, and Songkhla.
Figure 1. A product space map showing the density and relative size of these industries
This could initially be developed as a secondary activity at a farm and village level, where it
is important to consider and understand the resources and skill needs, attitudes, and
Agricultural Activities
Rubber
Palm Oil
Paddy
Fruit Production
Vegetable Production
Other Crops
Agro-Industry
Agro-Tourism
Handicraft
Fishing
Industry
Other Activities
Logging
Biotechnology
Service
Construction
Education
Transport
aspirations when engaging with communities. Selected activities can be clustered in certain
areas where all resources, skills, and connections can be made easily accessible to members
of the community. These are the critical factors behind the success of the batik industry in
Kelantan (Ma’rof & Fariborz 2010). Given agriculture’s limited capacity to absorb labour,
other rural business activities have a paramount importance in playing a role in
supplementing incomes (Shand 1983). Government and the institutional sector through the
Eastern Corridor Economic Region (ECER) need to provide the infrastructure such as
adequate roads, cold stores, extraction facilities, and other infrastructure that is outside the
capacity of local entrepreneurs to purchase and develop on their own.
The smallholder sector generally has a very low technology base. There has also been a
large failure in successfully implementing new crops and developing village based products
in the sector. Research institutions like MARDI follow only national new crop agendas, so
regional new crop development is left to the various state agriculture departments, most
having extremely limited resources for research, development and extension5. There are a
number of steps required to successfully implement a new crop, which needs technical,
management, entrepreneurship skills and finance. Financial institutions are extremely
reluctant to advance funding for new crops and technology development. Smallholders have
traditionally only been interested in cultivating crops for other people to market and sell,
thus missing more profitable parts of the value chain.
Table 1. Issues and problems Encountered in New Crop Development6
Issue Comments
Focus Paradigm • Requires focus on concept of food where present focus is
on cultivation
• This requires research
• This requires entrepreneurship approach
• Concepts not understood by farmers
Basic Research • Needs access to worldwide data
• Requires availability of suitable germ-plasmas
• Requires basic R&D to determine whether crop
technically suitable
• Requires basic R&D to determine if potential crop is
economically feasible
Crop Management &
Processing
• Propagation technologies
• How to plant, cultivate & manage to crop
• How to harvest, extract, store and handle
• How to process
• How to package
5 New crops are referred to as crops for the future in the Malaysian 2012 budget speech.
6 Partly modified from Kee, T. B., Monoculture in Malaysia: Impacts, Potential Solutions, paper presented to
Monocultures: Environmental and Social Effects and Sustainable Alternatives Conference, Songkhla, Thailand,
2-6 June, 1996.
• Transportation and storage
Marketing
Infrastructure
• Require coordination of production with demand
• Require correct channels of distribution
• Requires a marketing strategy
Economies and
Logistics
• Requires enough volume to economically transport and
distribute
• Requires solution to inconsistencies of quality and
production
Organisation • Need committed people with strong leadership and trust
Government • Need to translate support into action
• Need funding allocations
Finance • Very difficult to obtain funding for these projects
Consumers • Need efforts for education & promotion
The author believes that failure to solve the many issues and exploit opportunities
mentioned above, have a basis in a socio-psycho ‘mindset’ prevailing in the country. This is
not to say that a change in mindset is the only factor that would result in solving problems
and exploiting opportunities. Infrastructure, education, skills development, market
scanning, new crop product and processing development and last but not least, financial
support are all factors, just as important to make change. However without mindset
change, the allocation of resources into all the other areas is not likely to change the nature
of the rural sector.
The Path to Development of Natural Products in Kelantan
Herbs, plant extracts, enzymes, and essential oils are all natural products that require
agriculture production, processing, and a serious marketing effort. All these classes of
products can be cultivated in Kelantan and have rapidly growing applications and
international markets. Although herbs, plant extracts, enzymes and essential oils are diverse
products, they share common plant based feed-stocks, however uses and markets are
diverse as shown in Figure 2., The family tree of herb derivatives. Together herbs, plant
extracts, enzymes, and essential oils make up a group of potential opportunities for agro-
entrepreneurs.
Figure 2. The family tree of herb derivatives (Hunter 2011).
Most of the product categories shown in figure 2 are in high growth mode both in the
domestic and international market. Table 1 provides a brief summary of each market. What
is necessary at this point is to identify specific segments in potential markets that value
chains can be created to satisfy from the Kelantan perspective. This may mean focusing on
specific niche markets rather than mainstream high volume markets where local SMEs
would come up direct against more efficient producers from neighbouring countries like
Indonesia, Vietnam, India, and China. This implies a feasibility relationship between product,
channel, agronomic and technology suitability, to determine viability.
Table 2. Summary of Natural Product Market Potential
Market Type Comment
Traditional herbal medicine Traditional systems of therapy including Homeopathy, Natropathy, Ayurveda,
Sidha, Unani, and Traditional Chinese Medicine are rapidly growing in
popularity throughout the world. Every long established civilization has its
own form of traditional herbal medicine. This is no different here in Malaysia,
Raw Herbs
Fresh Consumption
Dried Fermented
Extracts
Medicinal Powders
Medicinal Beverages
Essential Oils & Other Volatiles
Flavour & Fragrance
Personal Care & Cosmetics
Standardised Extracts
Phytopharmaceutical Products
Fractions & Isolates
Bioactive Compounds
Prescription & OTC Drugs
Agricultural Application
Traditional Herbal Medicines
Aromatherapy
Enzymes
where Traditional Malay Medicine (TMM) developed from the village on what
flora was available, relying on knowledge being passed down from generation
to generation for Hundreds of years. The largest market channel for traditional
Malay herbs is now through local and foreign owned direct marketing
companies. There are currently over 140 companies in Malaysia undertaking
direct marketing and selling different branded versions of Malay herbs. Herbs
are available as teas, tablets, capsules, balms and lotions, in cosmetics,
shampoos and blended as coffees.
Natural plant extracts as herbs Herbs can through various means be developed into concentrated and
standardized plant extracts. These can produce a variety of products. Today,
the United States is still the largest supplier of supplements to Malaysia and
the majority of these products are marketed through direct selling companies,
pharmacies, supermarkets and Chinese Medical Halls. The most popular items
are vitamins, minerals and plant extracts. Demand for health supplements is
increasing dramatically, possibly linked to the growing affluence in the country
and awareness of natural products. More Malaysians are taking supplements
to ward off illness and maintain a good state of health. This has also resulted
in many pharmaceutical companies including dietary supplements in their
product ranges.
Natural plant extracts for
agriculture
Plant extracts also have numerous applications in agriculture, particularly with
the rapid growth of the organic market for fruit, vegetables, meats, and other
manufactured products like textiles and cosmetics. For example, neem
(Azadirachta indica A. Juss) is considered by many to be one of the wonder
trees in our global bio-diversity. Numerous uses for this tree have been both
reported and practiced by many indigenous peoples over the centuries. Neem
is a major input in Thai and Indian agriculture for the production of natural
insecticides at farm level. Neem contains a number of compounds of which
two ‘steroid like’ molecules, azadirachtin and salanin, which exhibit very
potent insect repellency attributes. Neem does not knock down insects like
conventional pesticides, but rather interferes with the lifecycles, confusing
them to the point they cannot reproduce and thus disappear (Board of Science
& technology 1992).
Another important group of plant extracts are Pyrethrum based products
which are rapidly growing in demand for application as a pesticide in
agriculture. Under most jurisdictions it is organically certifiable. Pyrethrum is
extracted via solvents (usually hexane) from the flowers of Chrysanthemum
cinerariifolium, which could grow well in many highland areas of Malaysia.
Natural pyrethrum used to be the major active ingredient in household
insecticides before the synthetic pyrethroids, which have much longer residual
effects were developed. Natural Pyrethrums are non-toxic to humans and is
known as one of the safest pesticides in use.
Natural plant extracts for
cosmetics
Plant extracts play an extremely important role in modern personal care and
cosmetic products, from shampoo, conditioner, body wash, body lotion, and
face tonics, etc. A wide range of plant extracts are used, including aloe vera,
galangal, angelica, celery, green tea, hawthorn, yam, ju hua, Echinacea,
gingko, witch hazel, St. John’s wort, alpine lovage, tea tree, lemon balm,
mulberry, lotus, ginseng, and sage, etc., of which many can be grown and
cultivated in Kelantan.
Enzymes Enzymes are proteins that are able to catalyse chemical reactions and are an
important chemical compound that supports the biological functions of all
living species. Enzymes help plants, animals and humans convert substances
into different molecules. The market for naturally produced industrial
enzymes is in excess of USD $1.0 Billion per annum. The use of enzymes in
biotechnology is expected to increase enormously in the next few years. The
diversity in traditional biotech products will add more colour to the global
cosmetic market. People have used them for hundreds of years and known
that they work, but they haven't known how they worked. A lot of the supplier
companies are investing in doing tests and evaluations to find out how and
why they work, especially the European companies; the French in particular
are way ahead (FNN staff 2006).
Some base enzymes that are produced at farm level are proteases in the form
of bromelase from pineapples (Ananas comosus) and papain from papaya
(Carica papaya). Bromelain is really a collection of similar protease, which are
good protein digesting enzymes. Papain is also good at breaking down fibrous
substances.
Enzymes are also becoming popular in cosmetics as active ingredients. In face
scrubs, the enzymes have the properties of assisting in the removal of dried
and dead skin. In mouthwashes, enzymes help breakdown food substances
and maybe assist in teeth whitening. In shampoos, enzymes perform the
same process as in the face scrub for dandruff removal. In dishwashing
detergents and all purpose cleaners, enzymes assist detergency in removing
protein, greases and other organic substances. Some enzymes are noted to
have preservative qualities in their own right, lessening the reliance on
preservatives like parabens. The beauty in these products are in their
simplicity and naturalness, which makes them popular with consumers who
appreciate them for their basic efficacy and ‘greenness’.
Essential oils The word essential oil is often used as an umbrella term to cover a number of
different natural volatile aromatic materials, although strictly speaking not all
of these materials are essential oils. Natural aromatic materials can be
extracted from the roots, rhizomes, wood, bark, leaves, stems, fruits, flowers
and seeds, from a wide variety of plant, shrub and tree species. Different parts
of the same plant may contain compounds which differ in their chemical
composition, and may or may not require different methods to extract these
compounds effectively. Primarily, the extraction method used determines
whether the aromatic extract is called an essential oil, concrete, absolute,
tincture, pomade, oleoresin, or balsam.
The World farm-gate value of essential oils is approximately USD 2 Billion per
annum, of which almost half are used for the production of flavour and
fragrance compounds used in cosmetics, personal care products, household
cleaners, and processed foods, etc. Essential oils are also used in cosmetics,
aromatherapy, as industrial intermediates to produce other compounds,
pharmaceuticals and agricultural pesticides and fungicides. It is in this area
that the use of essential oils is growing exponentially.
A new generation of crop protection products is emerging in the market,
based on soap and essential oil emulsions. These products take advantage of
the anti-microbial properties of tea tree oil (Melaleuca alternifolia) to function
as a fungicide. Biomor of the United States manufactures these products
under the trademarks of Timor and Timorex. These products are certified as
fully organic and are sold as fungicides and insecticides. The company claims
that these products can be tailor made to selectively attack insects, leaving
those beneficial alone. It is further claimed that these products leave no
residual and can fully negate the need to use copper or sulphur in field
application. The following photo shows the efficacy of the product on
cucumber leaves, compared to a control and commercially available synthetic
products.
Plant extracts in some form or another due to both scientific and market reasons are leading
to pronounced aspirations on the part of consumers to use more in the future. Thus this
opportunity involves both the sourcing of new potential plant extracts and the
determination of the viability to produce existing herbal extracts of trade. From the market
point of view, many more options exist to develop specialized value chains that can meet
the requirements of specific sets of consumers7.
The development of new plant extracts generally involves the identification of active
molecules and their associated mechanisms of action, requiring expensive studies to
demonstrate efficacy and absence of toxicity. The production of existing plant extracts 7 The opening up of the potential to develop new value chains is partly the result of new market niches like
organic, Halal, and ethical-Fairtrade, and the advent of the internet as a means of quick and simple
communication across the globe.
involves the setting up of a supply/value chain concerned with the production of plant
biomass at the beginning, harvesting and processing of the crude materials, the processing
of an extract and standardization, the development of a consumer product in some cases,
and finally its distribution to consumers. This requires making the correct choices in order
that these activities become are viable, and consequently there must be some quick method
of investigation and evaluation – a current weakness in the Malaysian
biotechnology/natural product development paradigm to date. This is important as failure
discourages future attempts and creates negativity about a potential new agro-based
activity. The ‘upstream’ usage of many products is most often ignored or left to hearsay and
unsubstantiated information ultimately leads to failure. This is an unfortunate story told
over and over again in Malaysia.
There are three important areas that will determine the viability of any natural product.
First are the actual characteristics and the nature of the product itself. Second is the
agronomic viability of the crop in local conditions, and third includes the specific project
issues. The next section will outline each area and briefly describe the important points to
consider when making a determination about new material or product viability.
New Natural Product (Essential Oil) Characteristics
The market potential of a new natural product (in this case: an essential oil) depends upon
the potential range of applications within the flavour and fragrance, cosmetic,
aromatherapy, or agricultural chemical industries. The scope of potential uses directly
corresponds with the characteristic strengths and weaknesses of the oil. The major criteria
are summarized below;
• The novelty of the essential oil is determined by the perceptions of the intended
industry, i.e., onganoleptic or olfactory profiles for flavour and fragrances, folklore
and fact for aromatherapy, or efficacy for cosmetic or agricultural applications. The
degree of novelty is limited by the closeness of substitutes.
• The potential uses and applications of the new essential oil. These have to be
accepted by those within respective industries.
• The closeness of any substitutes. The closer any potential substitutes the less the
potential.
• The stability of the new essential oil. The essential oil must be stable in potential
applications.
• The cost/performance ratio. The new essential oil must perform cost effectively in
potential applications to be of interest to industry.
• Toxicity is a major issue in the international trade of essential oils, particularly to the
EU markets. This may take a lot of time and expense to develop a dossier to prove
product safety.
• The general consistency of quality and supply. Any new essential oil must have
enough production volume for major potential customers to take the product
seriously.
• The prevailing market/product trends. New essential oils that match current market
trends will be more acceptable than those that don’t.
• The current level of technology. The more difficult it is to reconstitute a new
essential oil in a laboratory, the greater the market potential (Hunter 2009, pp. 245-
246).
Figure 3 shows a grid with each of the above product characteristics plotted vertically where
a determination about each characteristic can be made and plotted. Line A shows an
essential oil with low novelty, and low potential applications, etc. This would not be very
viable. In contrast line B is highly novel and high potential applications, etc., and is highly
viable. However most new essential oils will not have uniform viability across all the
characteristics like line C and require great examination about what characteristics are most
important to the potential market sector. Line D shows a new essential oil that has very little
advantages and thus of marginal industry value.
Figure 3. A Grid showing the characteristics of a new essential oil.
The novelty of a
new essential oil
The potential
uses & applications
of the new essential
oil
The closeness of
any substitutes
The stability of
the essential oil
in applications
The
cost/performance
ratio
The Toxicity
The general
consistency of
quality and supply
The prevailing
market/product
trends
The current
level of
technology
Low Novelty High Novelty
Low Potential High Potential
Close
Substitutes
No Close
Substitutes
Poor Stability Good Stability
Poor Ratio Good Ratio
High Toxicity Low Toxicity
Low
Consistency High
Consistency
Low Trend
Match High Trend
Match
High
likelihood of
synthesis
Low
Likelihood of
Synthesis
A B D C
The Agronomic Characteristics
The second area of evaluation is straight forward agronomic evaluation. These include the
availability of the correct genetic material, the habitat and topography of the selected land
site, soil type, texture and drainage, temperature range suitability, rainfall suitability, access
to irrigation, diurnal radiation, the complexity of the crop maintenance cycle, pest, disease
and weed issues, and the complexity of harvest and extraction. Very few crops have exact
matches with the land they are planted upon, but the grid shown in figure 4 lays out the
issues visually so the required conditions for the new essential oil can be evaluated
according to the proposed land site.
Figure 4. The Agronomic Characteristics Required for the New Essential Oil
The Project Characteristics
The final area of evaluation is primarily specific project issues that will vary according to the
entrepreneur, enterprise, and location. Is the technology required for the venture low and
generic or high and specialized? Different entrepreneurs will have different access to
technologies and thus make different evaluations. Likewise the level of mechanization will
depend both upon the type of crop and planned farm size. Different crops will have
Genetic Material
Habitat &
Topography
Suitability
Soil Type,
Texture &
Drainage
Suitability
Temperature
Range
Suitability
Rainfall
Suitability
Access to
Irrigation
Diurnal
Radiation
Crop
Maintenance
Cycle
Pest, Disease &
Weed Control
Issues
Easily
Available
Need to
Develop
Very Suitable
Not Suitable
or Need to
Develop
Very Suitable Not Suitable
Very Suitable Out of Range
Very Suitable Deficient or
Excessive
Yes No
Very Suitable Out of Range
Common &
Generic
Require
Specialized
Processes
Common &
Generic
Require
Specialized
Processes
Harvest &
Extraction
Processes
Common &
Generic
Require
Specialized
Processes
different research time frames ranging from simple trials to long drawn out formal research
projects in conjunction with outside research institutions. Capital requirements will be
unique to the type of crop, and depend partly on existing farm infrastructure to some
degree. It will be much more costly for an entrepreneur to enter the industry as a new
player than expand production from an existing base. Crop cycle timeframes will vary
according to the specific crop and different entrepreneurs have different views about what
they are looking for and prefer. How much additional infrastructure is needed is a prime
determinant of viability and will differ greatly among farmers.
The last three criteria are extremely important. Regulation of essential oils has become so
stringent of late. It is very important to spend a lot of time examining what is required in this
area thoroughly. It is not just about meeting the cosmetic, pharmaceutical, or food law
requirements here at home and abroad, but also about GAP, OSHA, and EPA, etc. The
current level of skills, competencies, and capabilities is paramount to viability and success
(see table 3). In most cases specific skills for specialized essential oils will be low, although
basic agronomy knowledge may be good. The critical issue here is whether you believe and
are prepared to travel along the steep learning curve needed to develop a new essential oil
crop. Is this a challenge you want to accept, or something that makes you put the whole
idea in the ‘too hard basket’? Finally, do you have the networking necessary to develop and
market the crop? Where and what is the actual market you are planning to enter? How big
is this potential market? And, Are there competitors or potential competitors around?
Figure 5 shows the specific project criteria that need to be evaluated for viability.
This short sojourn into examining new essential oil viability covers the basic issues in a
pictorial way that will quickly highlight the issues and challenges requiring much greater
thought. Each new natural product and project is unique and consequently will have it’s
own unique challenges.
Figure 5. The Project Characteristics.
Table 3. A Simple Competency Audit Example (Hunter 2009, P. 299).
Competency Present Not
Present
Comments
Technical
1. Botany
2. Plant Physiology
3. Chemistry/Analytical
4. Micro-propagation
5. Nursery Management
6. Environmental Engineering
7. Chemical engineering/thermodynamics/etc
8. Soil Management
9. Agronomy/plant nutrition/field
management
10. Entomology
11. Irrigation engineering
12. Agricultural Engineering
13. Regulation knowledge
14. Cosmetic chemistry/food etc
15. Perfume/flavours
16. Packaging & design
17. Consumer product manufacturing
Basic
Basic
Experience
Experience
Experience
Basic
Basic
Basic
Low
Low
Low
Low
Low
Low
Low
Low
Low
Need guidance
Need assistance
Need guidance
Assistance Available
Can design
Need appraisal
Use contractor
Use institute
Replicated
experiments
With Environment
Use contractor
Can develop
Need assistance
Learn from
experience
Use contractor
Technology
Required
Level of
Mechanization
Required
Research &
Development Time-frame
Capital
Requirements
Crop Cycle
Timeframe
(Additional)
Infrastructure
Required
Regulatory
Issues
Skills,
Competencies
& Capabilities
Required
Networks,
Market, Potential
Competitors, etc.
Low &
Generic
High &
Specialized
Low and/or
Generic
High and/or
specialized
Short & straight
forward Long &
Complex
Low High
Short Long
Low High
Low Need of
Consideration
High Need of
Consideration
Common &
Generic
Rare &
Specialized
Available
Networks, Wide
Market & high
competition
Need Network,
Specialized
Market, Few
Competitors
Potential
Revenue High Low
Opportunity/Entrepreneurial/Commitment
1. Able to screen environment for
opportunities
2. Able to evaluate opportunities
3. Commitment level
Yes
Yes
Passionate
Need to see
realistically
Relationship
1. Have relationships in target industries
2. Have relationships in research area
3. Have relationships in finance industry
A few
A few
Some
Organising/Management
1. Able to project manage
2. Able to administrate
3. Able to financially manage operation
4. Able to undertake research
5. Able to keep key people motivated
Yes
Yes
Yes
Yes
Yes
Strategic
1. Understand dynamics of market and
industry environment
2. Able to plan for a business within this
environment
3. Able to implement, evaluate and adjust
plans in this environment
Yes
Yes
Yes
Believe so but not
tested
Most industries prefer plant extracts that have full documentation and a history of use
known to consumers exists8. This requires pharmacopoeia, scientific dossier, and scientific
journal results that are accepted by regulatory authorities9. To meet many of these
8 This includes Traditional Chinese Medicine (TCM), Ayurveda, Aromatherapy, Cosmetic and flavor and
fragrance industries.
9 European regulations prohibit or limit the use of a number of plants or ingredients in cosmetic products. The
absence or reduced levels of potentially toxic products in herbal extracts must be determined. At a European
level, products classified as CMR (carcinogenic, mutagenic and/or reprotoxic) as defined in Appendix VI of EC
Directive N°1272/2008 concerning the classification, labelling and packaging of substances and mixtures,
except if a waiver is granted. The presence of other constituents such as pyrrolizidine alkaloids,
furanocoumarins or molecules known to be allergens or sensitising compounds, is not desired because of risks
of possible toxicity or harmful adverse effects they could cause. The question related with the ecological status
of vegetal resources and the social and environmental impact that could result from their harvest has to be
addressed. Recommendations related to culture and collection of plant starting materials have received
sustained interest for several years, especially for medicinal plants. The system implemented for plant-based
medicines is a relatively precise regulatory framework defined by Directives or Recommendations from
European and other international organisations such as the European Medicines Agency or the World Health
Organization. These good culture and harvest practices are summarised in two documents: For Europe, by the
“Guideline on Good Agricultural and Collection Practice” of the Committee on Herbal Medicinal Products of
the European Medicines Agency (2006) Outside Europe, by the WHO Guidelines on Good Agricultural and
Collection Practices (GACP) for medicinal plants (2003). In reality, these regulatory frameworks applied to
medicinal plants can also be usefully employed for supplies of starting materials destined for non-medicinal
uses. This is because the above-mentioned documents are partly based on preparation work conducted by the
EUROPAM (European Herb Growers Association) that drafted an initial document entitled “Good Agricultural
and Wild Collection Practice of Medicinal and Aromatic (Culinary) Plants” in 1998. This document included all
plant starting materials and their derivatives, used and marketed in Europe, usually designated by the acronym
requirements, the outsourcing of extraction and processing according to international
standards is required. Therefore developing this basic infrastructure around strategic
locations of the state is necessary. SMEs must then decide whether they will specialize in
the production of the crude material or incorporate that material into a consumer or
industrial product, and this is where the development of the supply/value chain must take
on major consideration.
Value Chain Development
Natural product development fits into the traditional discipline of new crops, a field of
agriculture which looks at the potential introduction of new species or varieties being placed
in new locations, with new technologies for producing a product, with a new market, or a
combination of all these factors. Thus, for a new natural product production venture to be
successful, the application of new breeding techniques, efficient production systems,
development of new products and markets are all required. In the majority of cases, the
knowledge to achieve all the above is strange and unknown to the new producer. On the
sales side, new customers, whatever position they are in the supply chain, need to be
satisfied in terms of product, price, quality and service level. This product must be produced
competitively enough to cover propagation, growing, crop maintenance, harvesting,
processing, marketing and administrative costs, as well as allowing for enough profit margin
for each member in the value chain.
Developing and managing a successful natural product venture requires understanding the
technical disciplines of botany, natural product chemistry, plant physiology, propagation
methods, agronomy, agricultural and extraction engineering, and analytical chemistry, as
figure 6 depicts. Many technical problems require solutions that can be only partly solved
through individual disciplines, thus requiring an interdisciplinary approach. In addition, farm
to consumer supply chain knowledge, planning and market development is necessary. Both
areas of knowledge and expertise must be developed in tandem to create a venture that is
successful. Ignoring either side of the new venture development, will most likely lead to
failure.
In many cases, those setting out to develop a new natural based product venture will usually
have little previous farming, processing and/or market experience. This immediately sets
out a number of challenges. Firstly the degree of success will be directly related to what
crop is chosen. Selecting the right crop to grow (and this also has much subjectivity), will
depend upon the access to good information which can lead to the making of informed
decisions. Usually the first exposure to knowledge is news passed on from a friend,
conference or seminar or some form of media, electronic or otherwise. There is no shortage
of media reports and internet information about natural products, which can lead to ideas.
However one must be extremely cautious as most media reports, internet information and
MAP (Medicinal & Aromatic Plants). The general principles of these directives can be broken down into four
major areas: identity, quality and hygiene, regulatory compliance and environmental responsibility.
even many conference and seminar papers which are sometimes developed for publicity
purposes and can be full of ‘hype‘ and enthusiasm, rather than factual information and
knowledge. Technical and scientific papers although often of great use in technical
development, however they are not marketing documents The potential producer needs to
be aware of the limitations of published information.
Figure 6. Disciplines Required in the Essential Oil Development Process
The above sources of information can lead to no shortage of ideas, which sometimes
carry emotive wishes. These ideas must be filtered through the use of more factual
information to screen the facts from the ‘hype‘. Decisions need to be made on the best
factual information available, which can lead to accurate knowledge. This can only be
Competencies Required During the Essential Oil Development Process
Screening & Bio-prospecting
Propagation & domestication or
introduction
Planting, cultivation & maintenance
Harvesting, Extraction and
wastage handling
New product development &
creation of value added products &
activities
Strategic, operations, finance and technical
management
Product & venture management
Marketing & commercialisation
Sustaining and growing the enterprise
(adapting & survival)
Output: Result/Performance, Sustainable and healthy enterprise or
a struggling and failing enterprise
Opportunity and technical competencies require:
Botany, ethno-botany, research ability, chemistry, bio-chemistry, analytical
chemistry. Market and specific technical product knowledge
Technical Competencies require: Plant physiology, micro-propagation, nursery
management, agronomics
Technical competencies require:
Bio-system engineering, Soil management,
entomology, plant nutrition, Agronomics, field
management, irrigation engineering
Technical competencies require:
Thermodynamics and plant physiology, heat transfer, distillation engineering,
chemistry, chemical engineering, agricultural
engineering, environmental engineering (waste
management)
Strategic, opportunity and technical
competencies require: Project management,
marketing management, chemistry, cosmetic
chemistry, perfumery/ flavour knowledge,
Packaging & design, manufacturing
engineering
Strategic, organizational, relationship opportunity competencies require:
Business strategic, industry knowledge, industry
networks, ability to raise finance, ability to plan, implement & adjust,
leadership, entrepreneurial
Strategic and organizational
competencies require: Administrative, financial management, technical management, strategic
management, personnel management, resources
management, entreprenuerial
achieved through discussions with potential customers and trial and error in field trials, so
knowledge can be developed into the wisdom needed to develop a successful enterprise.
Figure 7. shows the hierarchy of information that one has access to aid the essential oil
development process. This process must eliminate wishful thinking and excitement to
convert mindful enquiry into a more rational and objective frame to be able to observe the
realities of technical and market issues, before proceeding to the next stage.
Figure 7. The continuum from media reports to wisdom in relation to availability and
usefulness.
Strategy development must also take into account the interest of the promoter and
accommodate his or her vision. This interest may be generated from thoughts and feelings
about the industry, products and markets, originating from a desire to vertically integrate
into agricultural production, an interest in a specific natural, a wish to develop products
from a specific or group of natural products or a desire to find an alternative crop. Whatever
the inspiration for the promoter’s vision is, it will most likely fit into the natural product
Strategic Matrix shown in Table 4. This matrix identifies the basic characteristics of the
contemplated natural product as 1) an existing crop – product already traded, 2) an existing
crop – leading to a new product, 3) a new crop to a new geographical area, where the
product is already traded, and 4) a new crop and new product. Shown in the table below are
the specific important issues (or desired outcomes) that will become important objectives of
the development project.
The promoter’s vision may involve a want to produce value added products based on the
crude material as an input into a final product, or utilising parts of the plant material for the
production of other by-products, or utilising waste materials as much as possible to improve
revenues and sustainability. In these cases the venture may market various products to
different industries (i.e., agro-products, alternative energy feed-stocks, animal feed, etc.), or
in the case of value added essential oil products, focus on higher parts of the supply chain.
Av
ail
ab
ilit
y I
nc
rea
se
s
Usefulness Increases
Media Reports
Ideas
Data
Information
Knowledge
Wisdom
The Continuum from media reports to wisdom in relation to availability and usefulness
These visions heavily influence the whole focus, capital, technology and processing,
management and market development requirements of the venture. These value added and
by-product diversifications also affect revenue. Figure 8. conceptually depicts the various
value added processing options with cost and revenue implications.
Table 4. The Natural Product Strategic Matrix
An Existing Crop – Product Already Traded
This can be seen as an improvement on
existing production or setting up new
production in an area already producing the
crop.
• Improving cultivation and harvesting
methods to improve productivity
• Finding new customers and channels to
increase sales
An Existing Crop – Leading to a New Product
This may involve moving along the value chain
to a new market based on an essential oil
already produced or producing an essential oil
for some type of value added product.
• Improving cultivation and harvesting
methods to improve productivity
• Finding out what products potential
customers want in a new product
• Producing a new product according to
identified consumer needs
• Organising the supply chain for the new
product to get to market
• Making the product available to more
consumers who are likely to want it
A New Crop to a New Geographic Area
This involves producing an essential oil already
in trade in a new geographical area.
• Establishing the most efficient way to
cultivate, harvest and process the natural
product
• Matching the newly produced natural
product with customer expectations and
requirements
• Organising the supply chain so the natural
product reaches the market
• Making the natural product available to
new customers who are likely to require
it
A New Crop and New Product
This involves producing a product higher up the
value chain, differentiating it and producing
the natural product.
• Making informed decisions about new crop
choices
• Establishing the most efficient way to
cultivate, harvest and process the natural
product
Finding out from potential customers what
they want from the new product
• Making sure the oil meets the customer’s
needs as closely as possible
• Organising the supply chain so the natural
product reaches the market
After considering what type of product could be produced by the potential venture, which
part of the supply chain will be focused upon to generate sales will be the next issue. The
type of product and level of the supply chain the enterprise targets will require focus on
different sets of issues. The production of an essential oil for the flavour and fragrance
industry, especially an existing item of trade will require studies and information about
current World demand and supply, future expectations, trends and the elasticity of supply
from current producers. Once satisfied there is room for a new producer, the enterprise can
target specific customers to work with or attempt to develop selling channels through
traders on the open market. The development phase will be mostly concerned with
technical aspects of producing the natural product, which include meeting regulatory
requirements, producing the desired olfactory profile required by customers, and meeting a
cost that provides a positive return to the producer. This enterprise has an agro-orientation,
where the important issues are demand, supply, competitive costs and quality.
Figure 8. Conceptual Value Added Processing Options with Revenue and Cost Implications
Producing a new natural product will require focus upon potential specific industry
applications that the oil will attempt to satisfy, whether it is for a flavour, fragrance or
cosmetic ingredient, etc. Knowledge about final application of the oil in the intended
industry use is important, so its potential value can be demonstrated. Some development of
intellectual property, whether through patent or proprietary knowledge on process or
product is likely, and can be used as a method to create barriers of entry to other potential
producers. Within this focus, close work will most likely be undertaken with specific
customers who may or may not exclusively purchase the product from the producer in the
future. This type of enterprise has an industrial orientation, where the important issues are
technical development, potential substitutes and complementary products.
Producing one or a number of natural products as intermediate products in the production
of end products, such as aromatherapy, cosmetic, agro-chemicals, nutraceuticals or
pharmaceuticals requires a focus upon the market. This means understanding consumer
$ Cost
$ Return
Deg
ree
of
Pro
cess
ing
Final Product Form
Selection of Crop
Trials
Propagation
Land Preparation
Planting, Maintenance &
Irrigation
Harvesting & Extraction
Product Development
Final Product
Crop &
Project
Failure
No
Return
Co
mp
ost &
M
ulch
Bio
fuel
An
imal F
eed
Cru
de E
ssential O
il
Org
anic A
gro
-p
rod
uct
Co
smetic &
A
rom
atherap
y
Nu
triceutical
Ph
armaceu
tical
Conceptual Value Added Processing Options with Revenue and Cost
Implications
tastes, trends, product development and how to engage consumer markets. The enterprise
is required to develop products that match and fulfil consumer wants, building up a theme
or corporate and product brand images that differentiate the product from others already in
the market. The enterprise will be concerned with ways to make the message about their
products reach as many consumers as possible within the groups they target. Over the last
decade new methods like the internet and direct marketing channels in South-East Asia
have become very popular and allowed a number of companies to utilise these alternative
supply chains, as has been successfully undertaken by Thursday Plantation Tea Tree Oil in
Northern New South Wales, Australia. This type of enterprise takes a consumer orientation,
where emerging consumer trends, new product development and channels of distribution
are their important issues. Figure 9. shows the various differences in venture focus along
different parts of the supply chain.
Figure 9. Venture Focus along Different Parts of the Supply Chain.
The final consideration within the vision development for the potential project is the type of
production structure, organisation and entry strategy. The structure and organisation will
depend upon many factors. For example, issues like who are intended as the beneficiaries of
Consumers
Wholesalers & retailers
Manufacturers
Flavour & Fragrance Houses
Traders & Brokers
Primary Producer
Essential oil as
primary Product.
Focus on market
demand & supply
and meeting
standard
Essential oil as
an ingredient in
a product.
Focus on uses
and applications
research
Manufacture of end
products. Focus on
formulation and end
product
development
• Technical Focus
• General or Niche Customers
Vertica
l Integ
ratio
n A
lon
g th
e Su
pp
ly C
ha
in
• Application Focus
• Technology Focus
• IP Focus (?)
• Specific
Customer
• Branding
• Theme
• Consumer Marketing
• Reaching Mass or selected Markets
• New Product
Development
Agro Industrial Consumer Orientation Orientation Orientation
Consumer Trends
Important
Technical Trends
Important
Demand & Supply, Buying
Criteria Important
Venture Focus Along Different Parts of the Supply Chain
the initiative, the selected crop, location, market size and potential market share target,
required level of field and extraction technology and envisaged scale of the enterprise, will
influence structure and oranisation. A number of options exist, which include a) wild
collection, especially if the crop cannot be cultivated like sandalwood within a short to
medium time frame, b) small scale production similar to a small holder if the project is a
hobby, c) an extension crop of an existing farming enterprise, d) a small to medium sized
plantation or e) a large plantation, if economies of scale are needed to develop the market
based on cost competitiveness. These types of enterprises can be controlled and managed
by an individual, family or company, a cooperative or community group, or a company
controlling processing facilities and a marketing organisation.
The Basis of Action
So what are the specific problems that must be overcome to develop new natural product
based enterprises in Kelantan? These problems will include;
• Lack of capital for production development.
• Lack of capital for developing the market and creating new channels,
• The difficulty in taking advantage of channels of distribution once they have been
gained,
• Small local market,
• The difficulty in developing natural product based new entrepreneurs,
• The difficulty in creating enough product differentiation to really make a difference
in the market,
• Overcoming producer isolation,
• Incubating multiple “farm to consumer” projects at once, and
• Difficulty in getting larger companies to commit, invest, and distribute products
produced at village level.
Solving the above problems requires a carefully thought out plan that takes into account the
local conditions in Kelantan, involving a number of steps.
1. Determine Kelantan’s Branding Advantages which involves developing a branding
story and market philosophy that has horizontal and parallel diversification
potential. This could be based on the development of the Toyyib/Halal herbal
concept, organic, and ethically based community framework that will appeal to
consumers outside of Kelantan and within the Asian region. For example herbal
treatments based upon an Islamic theme would be able to exploit local biodiversity,
utilize the local culture as part of the branding theme, maximize the benefit of
location of “Brand Kelantan” as a marketing advantage which will create a new
source of competitive advantage through differentiation into a relatively low
competitive market segment. This branding exercise would reverse all the
disadvantages of production fragmentation, remoteness and location into a strength
– products produced by the community that benefit the community directly – the
essence of Fairtrade and ethical products.
2. Centralize the marketing and decentralize the production and ownership. Create an
enterprise that centralizes the product development, marketing, sales, finance, and
general operations and decentralizes the production to members of the alliance or
cooperative. This marketing organization would be responsible for developing the
business and responsible to the membership, who are the producers. The centralized
enterprise would coordinate research with local research institutions, operate as a
direct marketing company, promoting products through multiple channels like
roadshows, airlines, airport terminals, shopping malls, and through online website
shops10
. The firm would also possibly through a unit trust arrangement be able to
raise capital from the public. The marketing company could be operated by
graduates of University Malaysia Kelantan, under supervision of marketing
professors – the younger generation working hand in hand with the older
generation. Figure 10 depicts the business model described above.
It must be strongly emphasized here that a small group of people will have to take
the responsibility the potential crops, products, and value chains that need
developing and take the initiative of educating and disseminating information among
the kampong people, and in return receive a natural collaborative effort and
participation from them. There is also the risk and tendency of duplicating and
copying any successful product by others that may create a glut and oversupply of a
particular product11
.
A producing company would be a democratic co-operative, of local producers,
workers and collectors, mentored by professionals. The venture, will have ethical
trade at its heart, working in partnerships with producers to first meet their
nutritional, food and health needs, including local communities, have long term
arrangements with the marketing company, and will act as a resource base for its
producers/partners, fully supporting them in providing them with required services
at their doorstep, leaving them to farm and on farm responsibilities. The aim is to
provide a smooth, transparent, and fully managed supply chain, from primary
production, knowledge, management, adding value, holding capacity and ensure the
‘Cash to Cash Cycle’. The company would act according to the following principals;
1. Commitment to Social Justice in Organic Agriculture
2. Transparency and Accountability
3. Direct and long-term trade relationships built on trust and mutual respect.
10
This to some degree follows the OTOP example in Thailand. In addition direct marketing in Malaysia and Asia
generally has a high consumer penetration. Kelantanese products should have a special appeal through such a
channel with a Toyyib/Halal ethical and community approach. 11
Private communication with Encik Azaharuddin Hassanuddin of Institute of Development Studies (Sabah).
Umbrella Brand (Marketing Company)
Network
R&D Support Cluster
Entrepreneurship
Ideas Opportunity Identification How to make
skills Market Skills
Foods
Herbs &
Cosmetics
Other
Traditional Products
Funding through
“prospectus”, Unit Trust,
Zakat, Closed
Markets
Direct Marketing
Internet
Collaboration with larger companies
(MNCs)
Selected Markets
Potential Micro Finance to Producers
Organic Farming, Fairtrade, Halal, etc
4. Equitable distribution of returns to stakeholders
5. Communication and information flow
6. Skills development and capacity building
7. Internal ethics, and
8. Professionals manning the PC, support the local community12.
3.
Figure 10. The “Brand Kelantan” Business Model (Modified from Hunter 2008).
The cooperative would be committed to organic, integrated and sustainable
production. The cooperative would be involved either in agriculture or in both
agriculture and product manufacturing as part of the overall marketing strategy of
the marketing company.
Finance for the cooperative will come partly from the marketing company which will
channel funds according to the cooperatives designated projects.
12
Principals set out for peoples companies by Dr. Subash Mentha, Bangalore, India, as communicated to the
author.
The producing companies aim is to develop a share holding structure that is
beneficial to all parties involved. It is hoped that key producers will become
shareholders in the company, thereby becoming ‘producer partners’. Although PC
will also engage in one-off trades with producers considered ‘non-partners’, the
above benefits, and the option to become ‘shareholders’ and therefore receive a
yearly ‘bonus’.
Three types of shares are envisaged:
a) The Founder’s shares, which would be the majority initially
b) Shares bought by large investors (which will not be sought initially)
c) Shares held by producers, who would not invest other than with their
products and favourable pricing.
A central marketing company could exist for each market. The objective of the
central marketing company would be to develop and control the market in each
country and organize producers according to the needs of the market. The company
would primarily be involved in product development in association with a university,
organizing logistics from producers to the market, providing finance to producer
units and undertaking the national marketing.
The management of the company would be by a small group of professionals,
preferably post graduate students under mentorship. The organization would aspire
to be a knowledge based company, which would compile and disseminate
information to those groups that require it for smooth operations. The specific
groups within the company would include;
� Strategic group
� Management group
� Marketing group
� Product development group
� Extension group
� Resource sourcing group
� Direct Marketing (sales group)
4. Access to local decentralized facilities. Remote regions in Kelantan like Jeli and Gua
Musang will require common facilities that would be available to entrepreneurs in
the area. Such facilities would drastically lower the barriers to entry into the natural
product processing industry and solve issues like the requirement of GMP and
HACCP compliance. Where a cluster of growers exist, common facilities will improve
the viability of these enterprises. These are issues that the ECER authorities and
Kelantan Biotechnology Corporation could consider.
Most, if not all pieces of processing equipment can be locally fabricated. In fact,
distillation equipment for farmers in Australia, Indonesia, India, and Cambodia, etc.,
are in the most part fabricated from scrap found and procured locally and built
relatively cheaply with the right knowhow. Alternative methods of extraction such as
solar distillation can be home-built very cheaply and suit small holders with small
quantities of biomass to distil, eliminating all fuel costs at the same time13. Small
manual “Kubota” type farming equipment can be modified to assist with harvesting.
Organic fertilizers can be produced within cooperatives where the “gotong royong”
approach to production is taken, with each member taking home their share
according to their efforts.
Rapid advances in technology are driving economic growth and development
throughout the world. Technology advances were the catalyst of the industrial
revolution. The advances in information, communications, containerization and
transport technologies over the last few decades have provided the means for
businesses to operate on a global scale like never before. However, technology in
much of the developing world is adopted without question. Dr. Asma warns there
…“is also the tendency for Asian countries, including Malaysia, to deal with the issue
of values in development by importing many technologies and systems wholesale
from abroad without going through the process of mental transformation necessary
to master them fully. Although Malaysia is going through rapid transformation, our
growth is one without development in the context of knowledge contribution to
science, engineering and technology. As long as we are consumers and operators of
sophisticated techniques, plants and technologies imported wholesale from abroad,
we are to a certain extent undergoing a technology-less form of industrialization.
This transformation of values and attitudes is a key issue in the nation’s development
agenda” (Asma 1995). Blind acceptance of technology is a barrier to empowerment,
reinforcing the accepted market structure. Accepting technology as a given, is
associated with a paradigm of doom, inhibiting local innovation.
Processing factories with GMP status can be built within mobile shipping containers
and be moved from region to region as needed for processing and manufacturing.
Professor Howard Frederick of Deakin University pioneered this system building a
chocolate factory in New Zealand which was transported to Melbourne Australia for
production. The key to success is finding and developing appropriate technology for
what is required.
5. The role of local universities. Local universities will need to play a very important
role as part of their outreach obligation to the community. This role would be wide
and varied beginning in the field of local and situational research of potential new
13
Oils produced through solar distillation would also have a neutral carbon footprint if biomass was produced
organically and possibly fetch premium prices in the world aromatherapy market.
crops and rural industries for Kelantan. As mentioned earlier, Kelantan requires a
localized rather than follow the national research agenda that organizations like
MARDI are obligated to pursue. This may mean uncoupling research from the
national agenda to focus on local needs and priorities. Therefore local universities
need to fill the research gap that exists in Malaysia.
Future essential oil research cannot rely on public research funding to assist in the
establishment of new essential oils. Farmers will need to empower themselves and
lead their own research in what is called farmer driven research (Biggs 1995). This
research approach escapes the irrelevant research provided by public institutions
and focuses on the real needs in developing a new crop (Martin & Sherington 1997).
Many research models involve the farmer in their own crop trials, without the same
rigour as academic research to achieve useable data that can be utilised by farming
communities. This approach is called participatory action research, farmer
participatory research, participatory technology development and on-farm research.
Although these models were originally developed for Third World farming
communities, they are quickly being adapted to problems of farming in developed
countries (Dillon & Virmani 1985). The shift from traditional based research to
participatory action research is shown in Figure 11.
Figure 11. A typology of Various Farming Research Management Concepts
The university will also need to play a role in providing specialized entrepreneurship
programs for bio-entrepreneurship. These courses will be much more specialized
Systems Agriculture
Agricultural professional stance that emphasizes
farming as a social practice that uses technology
Participatory Action
Research
Emphasis on co-learning through farmer and
community participatory research and empowerment
programs
Traditional Academic
Based Research Based on developing
technology and principals, models and possible
practices
Farming Systems
Research On-farm technical problem diagnosis and adaptive
research
Shift from theoretical and technical to community
collaboration and problem specific
research
General Local
Technical
Social
Domain Focus
Discipline Orientation
than standard entrepreneurship courses provided to rural people through various
agencies. Mentorship to members of the umbrella marketing company will also be
important where marketing and entrepreneurship professors will need to advise and
guide graduate executives of the company.
There are few programs available to rural people at or near their domicile.
Institutions set up specifically for community education most often lack instructors
with business experience at the micro level. Those courses available are mostly
based on conventional small business courses that are totally inadequate as they fail
to empower participants in the creativity of ideas, and focus on business models,
which already exist in heavy competition. They don’t show how to seek resources
outside of traditional institutions and lack guidance in showing how to seek
innovative ways to apply useful technology to the circumstances of how and where
they live. The gap between what is available, and what is needed, can be seen when
contrasting the various tenants of the small business and entrepreneurial paradigms
as shown in Table 5.
Table 5: Small business and entrepreneurial paradigms (Hunter 2008)
Attribute Small Business Entrepreneurial Business
Risk Risk is to be avoided by
undertaking a business activity
that is already proven to be
successful. Therefore business
models will not be novel.
Ideas and opportunities are
always risks. Every village and
every person is unique and will
have different ideas that suit
them.
Need to Achieve A small business is totally
orientated towards a financial
return.
Financial return may not be the
prime motivator. Individuals and
groups may want to produce
something they like and have
pride in.
Creativity An enterprise will fit into a
proven model so not much
creativity is needed.
The enterprise from the first idea
may be driven by many types of
creativity, and creativity itself
may be a source of satisfaction.
Flexibility A small business is a business
operated through a disciplined
routine in most cases.
Individuals and groups may be
looking for maximum flexibility in
an enterprise, so it can fit in with
their life, rather than they have
to fit in with the small business.
Change Small businesses rely on little
environmental change for
success.
Change in the environment may
suit individuals and groups as
they don’t want to get locked
into routine, and change
prototes their creativity.
Independence Financial independence is the
objective.
We are already independent and
don’t want a business to lock us
into a strict routine.
Foresight A daily, weekly, monthly or
seasonal cycle that is
predictable.
We may have to keep coming up
with new things to keep the
enterprise going.
Initiative There are very tight resources
to have much initiative.
We rely on initiative to keep
going, and all initiatives are
considered.
Control of
destiny
The future is controlled by sales
in the marketplace.
The future is in our hands of
what we want to be.
Commitment Total commitment. I want to be committed on my
terms.
Leadership I am the leader and do all tasks. Leadership is defined by tasks.
6. Resource gathering needs revolution to enable empowerment. The current systems
of finance available depend upon conventional business plans, collateral and
experience. People have little knowledge of where to get grants and little ability to
apply for them. Existing national grant schemes often make it so hard to get, many
feel it is wasting time trying. So much government development money is going to
development projects owned by the government, where it is hard to see how any
people can benefit (Nor Baizura Basri 2007). Within Islamic communities large pools
of funds exist through the Zakat mechanism which could be channelled for
empowerment. “Zakat revenue can be spent under tamlik mechanism for providing
an opportunity or raising productivity of the poor. Viewed from the long term
perspective the poor would become in time self-reliant, hense reducing the national
burden of spending money on social security schemes” (Khaliq Ahmad 2002).
Likewise public structures like schools, mosques and community centres can be
utilized for skills development and village meetings.
Marketing channels and the existing financial system can be utilized through the unit
trust mechanism to collect subscriptions from consumers to fund venture
development in rural areas. This would be a direct link between consumers and
producers, where the consumers themselves could also become stakeholders in
village enterprises and share the same visions and dreams. Many consumers are
looking for such a spiritual connection and products can become a facilitator of their
aspirations and dreams, assisting them in how they want to see themselves, through
spiritual materialism.
7. This effort needs to be bottom-up rather than top-down with a community
organization as the champion of the project. The track record of top-down initiatives
is well documented and new approaches to rural development need to be
experimented with. It is only when the rakyat feel that they own the project that it
will be successful (Korten 1980).
8. Finally this type of initiative should not forget who it is serving and be organized
around the needs of the people it is intended to benefit. The author of the
Millennium Goals Professor Jeffery Sachs also criticises the clinical approach taken to
poverty eradication, stating many remedies imposed by agencies are more symbolic
than substantive (Sachs 2005, P. 266). Sachs recognizes that development must start
with the people themselves who must be ready and willing to act both individually
and collaboratively, rejecting the acceptance of their fate (Sachs 2005, P. 242).
However a bottom-up approach through a community based organization in
Malaysia will be seen by many as not reachable, particularly with the author
advocating new crops and targeting new markets, and new branding paradigms with
new technologies to the people of Kelantan, in what some would think that this is
beyond the comprehension of the kampong people. But just as we sit back and tend
to start agreeing, we must remember the advances the OTOP program has made just
a few kilometres North of here in Thailand. It is important to select a group of
kampong people who really want to be involved in the early stages14.
Conclusion
God does not change the conditions of a people until they change their inner shelves
Qur’an 13:11
The new paradigm of poverty eradication is through the principles of entrepreneurship
where communities are empowered by enterprise. Such a concept outlined above has all
the ingredients available to be successful. What is needed is just some “idea champions” to
embrace the concepts and make it happen with institutional support. Team Kelantan is the
true secret behind a successful Brand Kelantan as such a concept requires cooperation
across a broad spectrum of communities and organizations. The state’s economic
development becomes the responsibility of the people themselves. From the point of view
of natural product development, government initiatives in the past have tended to have
lacklustre successes, as these commercial activities must be in the hands of highly motivated
entrepreneurs to be successful. National crop agendas may not be necessarily relevant to
Kelantan in the same way they are relevant to other states, as the structure of agriculture is
almost completely small holder based. Such a concept has a better chance of success in
Kelantan due to the “special sense of identity” Kelantanese feel towards their land.
Young graduates are the hope for future entrepreneurship in villages around the region, as
the catalyst of change. They are tomorrow’s leaders and have a specific role to play in
development. Students have access and knowledge to the information tools of our age.
They are the potential mobilisers, liasers and leaders of village empowerment, should they
14
Private communication with Assistant Professor Pairat Watcharapun Prince of Songkla University, Hat Yai,
Thailand.
choose to stay and do something. Graduates understand their own and also understand
universities as a source of technology and can learn how to deal with relevant agencies for
their cause. Graduates and the young are the only people who can build enterprises in rural
areas in the future. Through linking all the elements together new organizations can be
evolved that are based on the village model and link with consumers in developed markets
in two way communication. Due to the advances in communication through the internet,
graduates and villages now have unprecedented access to a wider international community
of buyers, retailers, Fairtrade organisations and consumers directly, with which to
communicate their intentions and seek support and customers; to advance the cause of
empowerment to people in developed countries without third party agents.
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